At the end of 2017, the then governor of the state of Ceará, Camilo Santana (PT), made a raffle in a live broadcast on social media. Imitating auditorium programs, he opened a map of the state, closed his eyes and drew with a finger the next city in Ceará that would receive the construction of an arena. The chosen one was Ipu, a city with just over a thousand inhabitants. It was part of a program to install forty arenas in Ceará, at a cost of around R$ 70 million. When telling the story in the book ‘Politically Incorrect Guide to Brazilian Politics (Ed. Leya)’, journalist Rodrigo da Silva defines: “In practice, Ceará tax payers’ money is literally being spent blindly”.
This example of Santana, elected senator in the elections of 2022, is symbolic for how many decisions are made in Brazilian politics. No wonder the regulatory quality in the country is poorly evaluated in international rankings. According to the Global Competitiveness Report 2019, in terms of the burden of government regulation, Brazil ranks last among 40 countries. In other words, Brazil’s regulation is considered the most harmful to the world’s business environment — which increases the so-called transaction costs, hindering investments that could accelerate the country’s economic development.
“A The truth is that a considerable part of our legislative work is incomprehensible, capable of creating literally tons of unintelligible rules for the average citizen. Part of our laws are useless or limited to flattering those in power, when not unconstitutional. An important part of this occurs due to the absence of legal instruments that guarantee rationality to political decisions, whether by the Executive or the Legislative”, criticizes Luciano Timm, lawyer, professor at FGV and president of the Brazilian Association of Economic Freedom.
Despite public managers and legislators not being able to do everything as they please, needing to respect various budgetary, electoral and fiscal responsibility rules, in addition to the Constitution itself, in some developed countries these restrictions are even greater and prevent the taxpayer is spent irrationally.
To overcome this problem, the United States, Canada and Australia are three countries mentioned by experts heard by Gazeta do Povo
of examples of the path that Brazil should follow. In common, the three countries use a tool called Regulatory Impact Analysis (AIR), “a procedure that seeks to identify and make a prior assessment of the expected results of those normative acts that seek to solve a regulatory problem”, explains Adriano Paranaíba, professor of economy of the Federal Institute of Goiás. “When it is done well, it can identify a regulatory problem and it is done giving the north to a well-designed public policy to prevent that regulation from causing more problems than the previous problem. In other words, how much will that legislation actually improve people’s lives?”
“In the United States, for example, a series of studies are developed from an organization centralized directly to the Presidency of the Republic . They even have the prerogative, if they find that a regulation is bringing more costs than benefits, to veto that harmful device”, adds Paranaíba. The aforementioned agency is the Office of Information and Regulatory Affairs (Oira). Without the same power, but with the prerogative of AIR, in Brazil the body responsible for monitoring the regulatory role of decisions is the Secretariat of Advocacy for Competition and Competitiveness (SEAE).
Timm states that opening Using an institutional device capable of producing technical cost-benefit analysis of regulations is “to hand over the decisions of the most powerful figures in the country to the whims of ignorance and the conspiracies of groups that organize themselves to wrest privileges from the pockets of taxpayers, even swearing to defend their interests. The inevitable result of the complete deregulation of political activity is the excessive regulation of citizens’ lives”, he criticizes.
The good news is that this exposed need for an instrument of checks and balances to political banality, with power to prevent unproductive and burdensome bills and government programs for the population is already underway in Brazil. In 2019 the Economic Freedom Act was enacted, which brings in its wording the need for regulatory impact assessment. But its use has not yet been disseminated with the speed that the country needs.
“In regulatory agencies, implementation has been easier, as there was already a requirement in the agencies’ legislation. In the executive power bodies, there is more cultural resistance, especially in those ministries that carry out economic regulation and, traditionally, without any impact analysis, as is the case of the Ministry of Agriculture, Livestock and Supply (MAPA), Ministry of the Environment ( MMA) and the National Consumer Secretariat (Senacon)”, analyzes Timm.
Among the examples of RIA already applied in Brazil is the case of nutritional labeling of foods made by Anvisa, which was reduced bureaucracy in the country after a cost-benefit analysis of the excess of information previously required.
Another case already implemented was Inmetro, which classified the risk of lighters as much lower than the use of fuel in displacement, reducing requirements regulations and documentation for a series of products.
Much still to be done
“I also perceive some difficulty from bodies that are not strictly classified as agencies, but who must follow the dictates of the LLE, such as the Central Bank, the Administrative Council for Economic Defense (CADE) and the Securities and Exchange Commission (CVM)”, analyzes Timm.
He also warns that respect for free enterprise and to regulatory limits by professional bodies that supervise and regulate professional practice has been complex, citing the case of the Federal Council of Dentistry (CFO), Federal Accounting Council (CFC), among others.
“Discussions with states and municipalities will still face many challenges. Ultimately, there will be a need for some degree of judicial enforcement. The Public Ministry itself needs to be aware of its role in defending the economic order and not just the rights of consumers in an atomized way”, argues the lawyer and professor.
Paranaíba also criticizes the process. “Many regulatory agencies seem to treat RIA as a checklist: ‘I want to regulate, so I do RIA to legitimize my action. More than just being done, it needs to be done with the real objective, which may be that not regulating is the best alternative”, he says.
Another point defended by him is the Regulatory Review Analysis. “We need to create that culture in order to know if it makes sense to keep that rule or revise it. In addition to creating the norm, you need to later verify its usefulness to know whether we should keep it or not”, he says.
The highest potential implementation of the Regulatory Impact Analysis also depends on this understanding by jurists, which involves the training of new law operators in college banks, the production of literature on the subject — the so-called legal doctrine — in order to to support judicial understandings in this sense, the so-called formation of jurisprudence.
“There is a lack of interdisciplinary studies in law faculties, even in the most traditional ones, except perhaps at FGV/SP, INSPER and some other private ones in which the subject is already taught at graduation and has consolidated research groups. In public colleges, there is more dogmatic and even ideological resistance. Many jurists are still restricted to just commenting on laws and not thinking about data, consequences and reality”, analyzes the professor.
Debating the topic, in 2022 “The new economic regulation” (Ed. CEDES) was launched, in which Timm is one of the authors. “I believe it will be an area of great development, although the path will not be easy as it requires the dialogue between law and economics”, he says.
Many distortions in policies are created by interest groups themselves when influencing political decision-making. Impact analysis is seen as a way of shielding the legislation from harmful interference.
“It is a way of protecting society against regulatory decisions that end up benefiting those who captured the government. It is a classic theme in the Economic Analysis of Regulatory Law. If we create regulation to address market failures, we must not forget government failures, and Brazil is the country of “bond capitalism” or patrimonialism, which means that the costs of capturing the government are lower than in other countries. ”, analyzes Timm.
“Our economic system is very isolated and we are almost immune to the process of economic globalization. RIA means that a regulatory intervention in the market must be justified by technical and scientific criteria (usually cost-benefit analysis). Good intentions are not enough!”, he criticizes.
This opinion is corroborated by Leonardo Siqueira (Novo) for his PhD in Economics at Insper and recently elected state deputy for São Paulo. “Public policies based only on good intentions are not enough, we need to assess the impact they have on society. The way in which a policy is implemented can cause us not to have the result achieved. The gym does this a lot, but there is often a delay in bringing the impact of an accomplishment. If an evaluation of the proposed policy was carried out before it was implemented, we would have gains in the legislative process that would benefit the population”, he says.
“ How much does the program cost? What is the need for his financial impact? Will the intended results be achieved? RIA is nothing more than, before proposing something, to analyze the impact if it is actually implemented. This culture needs to advance in politics”, argues Siqueira.
“The Organization for Economic Cooperation and Development (OECD) has already concluded that the most significant contribution of RIA to the quality of regulatory decisions is not the precision of the calculations, but the very action of analyzing, questioning, understanding the potential impacts of regulation and exploring possible alternatives. In other words: the biggest gain is in the process”, he concludes.